- by Barrister Shajib Mahmood Alam

In a move to fulfill the conditions of its Private Sector Power Generation Policy, the Government of Bangladesh issued a new circular on the 2nd Day of January, 2020. By operation of the new circular, apart from coal based companies, all power generation companies will enjoy 100% tax exemption. This incentive will be available to all power generation companies who will start operation before 31st December 2022.

In a move to fulfill the conditions of its Private Sector Power Generation Policy, the Government of Bangladesh issued a new circular on the 2nd Day of January, 2020. By operation of the new circular, apart from coal based companies, all power generation companies will enjoy 100% tax exemption. This incentive will be available to all power generation companies who will start operation before 31st December 2022.

Power Generation Companies will enjoy full tax exemption on income from their power generation business beginning from commencement of operation till 2034 which is considered to be a big incentive to draw investors to this fast-growing sector.

Apart from the companies, all foreign employees in such companies will enjoy tax exemption on their salaries for three years from their first date of arrival into the country. Again, this is a move by the Government to increase innovation and investment in this sector. In addition to these incentives, the companies will enjoy tax exemption on interest payable against foreign loans.

Royalties, Technical know-how and Technical Assistance fees payable by any power generation companies will be subject to these exemptions as well according to the 2nd January circular. The circular goes one step further in announcing that profits derived from trading in shares of these companies will also be subject to these incentives.

However, concerned companies will be subject to keeping accurate records and filing returns in accordance with section 75 of the Income Tax Ordinance 1984.

This circular should have a ripple effect on a global scale to encourage and draw in investors including renewable energy producers in a bid to implement the Government's master plan to transform the power sector of Bangladesh. The sector is one of the fastest growing in Asia and with an ever increasing demand, a profitable one too.

Bangladesh Law Partners BDLP and its partners have a long track record of supporting power and energy sector stakeholders including but not limited to licensing, land acquisition, setup and due diligence.